The sale of goods contract and its essential elements
A sale of goods is a contract to transfer property in goods to a buyer for a money price. Sri Lanka's Sale of Goods Ordinance follows the English 1893 Act.
Definition
A contract of sale of goods is a contract by which the seller transfers, or agrees to transfer, the property in goods to the buyer for a money consideration called the price. Here property means ownership, not mere possession. Sri Lanka's Sale of Goods Ordinance is modelled on the English Sale of Goods Act 1893, so English decisions on that Act are useful guides. Where the Ordinance is silent, the general law of contract applies.
Essential elements
- Two parties: a seller and a buyer, who must be different persons; one part-owner may sell to another.
- Goods: movable property, including growing crops and things attached to land that are agreed to be cut off; money and 'things in action' such as debts are not goods.
- Price in money: if goods are paid for with other goods, it is barter, not a sale.
- Price fixed by the contract, in an agreed way, by the course of dealing, or, failing these, a reasonable price.
- Transfer of property: the aim is to pass ownership, not only possession.
- All the essentials of a valid contract: agreement, capacity, free consent, lawful object.
Kinds of goods
| Kind | Meaning | Example |
|---|---|---|
| Existing goods | Owned or possessed by the seller when the contract is made | A lorry standing in a dealer's yard |
| Specific goods | Identified and agreed on when the contract is made | This blue van in the showroom |
| Unascertained goods | Described by kind only, not yet identified | 500 kg of BOPF grade tea from a warehouse stock |
| Future goods | To be made or acquired by the seller after the contract | Garments still to be stitched; next season's harvest |
| Contingent goods | Future goods whose supply depends on an uncertain event | Goods the seller hopes to receive on a ship that may not arrive |
Sale and agreement to sell
| Point | Sale | Agreement to sell |
|---|---|---|
| Property (ownership) | Passes to the buyer at once | Passes at a future time or when a condition is met |
| Nature | An executed contract | An executory contract |
| Risk (unless agreed otherwise) | Usually with the buyer, because risk follows ownership | Usually still with the seller |
| If the goods are destroyed | The buyer generally bears the loss | The seller generally bears the loss |
| If the buyer does not pay | The seller can sue for the price | The seller generally sues for damages |
Sale compared with similar deals
An agreement to sell becomes a sale when the agreed time passes or the condition is fulfilled.
At the Colombo Tea Auction, brokers sell catalogued lots of Ceylon tea for the producers, and exporters bid for them. A lot knocked down to a bidder is a sale of specific goods at a money price; a contract to supply next month's production is an agreement to sell future goods.
Short answer: “Define a contract of sale of goods.” A contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.
Structured question: “Distinguish between a sale and an agreement to sell.” Compare when property passes, executed vs executory, risk, loss if goods are destroyed, and the seller's remedy. Add an example of each.
Essay: “Explain the essential elements of a contract of sale of goods.” Define; explain two parties, goods (kinds), money price, transfer of property, and general contract essentials; distinguish sale from agreement to sell, barter, hire purchase and bailment.
Sale needs two P's and a G: two Parties, a money Price, and Goods, plus a transfer of property (ownership).